Goods and Services Tax (GST) is an Indirect tax (or consumption tax) used in India on the supply of goods and services. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes. Multi-staged as it is, the GST is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer and as a destination-based tax, it is collected from point of consumption and not point of origin like previous taxes.
Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28%. However, Petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual State governments, as per the previous tax system.[citation needed] There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on Gold . In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.
The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment of the Constitution of India by the Indian government. The GST replaced existing multiple taxes levied by the central and state governments.
The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of the Central government and all the states. The GST is meant to replace a slew of indirect taxes with a federated tax and is therefore expected to reshape the country's 2.4 trillion dollar economy, but its implementation has received criticism. Positive outcomes of the GST includes the travel time in interstate movement, which dropped by 20%, because of disbanding of interstate check posts.
The single GST subsumed several taxes and levies, which included central excise duty, additional customs duty, surcharges, state-level value added tax and Octroi. Other levies which were applicable on inter-state transportation of goods have also been done away with in GST regime. GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services.
India adopted a dual GST model, meaning that taxation is administered by both the Union and state governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State government by disabling them from collecting the tax owed to them directly from the Central Government. Under the previous system, a state would only have to deal with a single government in order to collect tax revenue.
HSN code
India is a member of World Customs Organization(WCO) since 1971. It was originally using 6-digit HSN codes to classify commodities for Customs and Central Excise. Later Customs and Central Excise added two more digits to make the codes more precise, resulting in an 8 digit classification. The purpose of HSN codes is to make GST systematic and globally accepted.
HSN codes will remove the need to upload the detailed description of the goods. This will save time and make filing easier since GST returns are automated.
If a company has turnover up to INR 15 million in the preceding financial year then they did not mention the HSN code while supplying goods on invoices. If a company has turnover more than INR 15 million but up to INR 50 million, then they need to mention the first two digits of HSN code while supplying goods on invoices. If turnover crosses INR 50 million then they shall mention the first 4 digits of HSN code on invoices.
Rate
The GST is imposed at variable rates on variable items. The rate of GST is 18% for soaps and 28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST for tickets that cost less than Rs. 100 and 28% GST on tickets costing more than Rs.100 and 28% on commercial vehicle and private and 5% on readymade clothes. The rate on under-construction property booking is 12%. Some industries and products were exempted by the government and remain untaxed under GST, such as dairy products, products of milling industries, fresh vegetables & fruits, meat products, and other groceries and necessities.
Checkposts across the country were abolished ensuring free and fast movement of goods. Such efficient transportation of goods was further ensured by subsuming Octroi within the ambit of GST.
The Central Government had proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and Petroleum products. The central government had assured states of compensation for any revenue loss incurred by them from the date of GST for a period of five years. However, no concrete laws have yet been made to support such action. GST council adopted concept paper discouraging tinkering with rates.
E-Way Bill
An e-Way Bill is an electronic permit for shipping goods similar to a Waybill. It was made compulsory for inter-state transport of goods from 1 June 2018. It is required to be generated for every inter-state movement of goods beyond 10 kilometres (6.2 mi) and the threshold limit of ₹50,000 (US$700).
It is a Paperless, technology solution and critical anti-evasion tool to check tax leakages and clamping down on trade that currently happens on a cash basis. The pilot started on 1 February 2018 but was withdrawn after glitches in the GST Network. The states are divided into four zones for rolling out in phases by end of April 2018.
A unique E way bill number(EBN) is generated either by the supplier, recipient or the transporter. The EBN can be a printout, SMS or written on invoice is valid. The GST/Tax Officers tally the e-Way Bill listed goods with goods carried with it. The mechanism is aimed at plugging loopholes like overloading, understating etc. Each e-way bill has to be matched with a GST invoice.
Transporter ID and PIN Code now compulsory from 01-Oct-2018.
It is a critical compliance-related GSTN project under the GST, with a capacity to process 75 lakh e-way bills per day.
Intra-State e-Way Bill
The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, Telangana and Uttar Pradesh, which account for 61.8% of the inter-state e-way bills, started mandatory intrastate e-way bill from 15 April 2018 to further reduce Tax evation. It was successfully introduced in Karnataka from 1 April 2018. The intrastate e-way bill will pave the way for a seamless, nationwide single e-way bill system. Six more states Jharkhand, Bihar, Tripura, Madhya Pradesh, Uttarakhand and Haryana will roll it out from 20 April 18. All states are mandated to introduce it by 30 May 2018.
Reverse Charge Mechanism
Reverse Charge Mechanism (RCM) is a system in GST where the receiver pays the tax on behalf of unregistered, smaller material and service suppliers. The receiver of the goods is eligible for Input tax credit, while the unregistered dealer is not.
The central Government released Rs 35,298 crore to the state under GST compensation. For the implementation, this amount was given to the state to compensate the revenue. Central government has to face many criticisms for delay in compensation.
Goods kept outside the GST
- Alcohol for human consumption (i.e., not for commercial use).
- Petrol and petroleum products (GST will apply at a later date), i.e., petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel.
